As announced in a previous article (see EUROPE 11798), the Council of the EU and the European Parliament on Tuesday 30 May reached a political agreement on the legislative proposal governing the activities of the venture capital (EuVECA) and social entrepreneurship (EuSEF) funds.
Readers may recall that the Commission presented this proposal in July 2016 in the framework of its Capital Markets Union project (see EUROPE 11594). The aim of these reforms is to improve access to funding for SMEs and social enterprises in order to promote jobs and growth.
“If European SMEs are to grow and develop, it is indispensable that financing - both bank and capital market financing - is readily available”, said Edward Scicluna, the finance minister of Malta, which currently holds the Presidency of the Council.
Speaking to EUROPE a few hours before the start of the trialogue, Sirpa Pietikäinen (EPP, Finland), the Parliament's rapporteur on this dossier, told us that although she hoped for an agreement, a number of questions remained unanswered, for instance the role of the European Securities and Markets Authority (ESMA) and capital requirements. “A move on the Council side” will be needed to reach a “balanced agreement” on these points, she said.
The Parliament managed to hold sway over ESMA's role in the fund registration and supervision process, which will be bolstered. This point was introduced by Parliament, which wanted to give ESMA powers to examine the registration processes of the national authorities (see EUROPE 11785).
Capital requirements, on the other hand, have been set at €50,000 for managers of both types of fund, as proposed by the Council, and these own funds must at all times represent at least one eighth of the fixed costs of the previous year. The MEPs had proposed a level of €30,000, arguing that it was important that capital requirements remain as low as possible to avoid blocking newcomers to the market.
The final agreement also took on board some of the Commission's initial proposals, such as the relaxed definition of SMEs in which a fund must invest 70% of the capital subscribed by its clients in order to obtain the European passport and the maximum number of employees of an eligible SME, which has been set at 499.
The reforms agreed upon will also allow venture capital fund managers with portfolios over €500 million and falling within the scope of application of the directive on hedge funds to access the markets of EuVECA and EuSEF funds.
They will also facilitate cross-border marketing and bring down costs by explicitly prohibiting charges imposed by the competent authorities of host member states in which no supervision activities are carried out.
“Today's agreement removes another barrier to venture investment at EU level”, said the Commissioner for Financial Services, Valdis Dombrovskis. The agreement will now be put before the EU ambassadors for approval on behalf of the Council and must be approved by the Parliament in plenary session. The new rules will apply three months after regulation enters into force. (Original version in French by Marion Fontana)